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Follow the Money

What took home builders Taylor Woodrow and George Wimpey so long to see that they were made for each other?

Both British, and from old-line home building pedigrees, they have similar values, similar size, and substantial stakes in the same U.S. states, where they are similarly being battered by the market downturn.

John Landrum, CEO, Taylor Woodrow and Morrison Homes' merged operations in North America Photo: Riku+Anna Actually, the pair has complementary skills that would make them stronger together than apart. Wimpey is known as a quintessential efficient operator, whereas Taylor Woodrow earns regard as a land-buying powerhouse. Merged, they become the biggest builder in Great Britain with 21,910 closings. In the United States, it will become the 14th largest builder by last year's completion numbers, with 7,247 closings, not counting the 1,592 homes Taylor Woodrow built last year under its Monarch name in Canada.

Those obvious synergies had triggered minor merger flirtations between the companies "for some time," says Peter Redfern, former CEO of George Wimpey and CEO-to-be of Taylor Wimpey, the name of the company formed through the 5 billion pound ($10.7 billion) stock swap. After all, in the scramble to tie up the scarce U.K. land positions, every builder seems to have been talking to every other builder about combining efforts. As a result, merger deals in Great Britain have been happening so fast it might be smart to bring the Reverend Sun Myung Moon in to facilitate.

Still, there apparently were no real Taylor Woodrow-George Wimpey sparks until a few hot and heavy speed-dating sessions in February, when the pair got serious, says Redfern.

What was different during those February meetings than earlier encounters?

Ceo A Go-Go

"Two things were present that are not always present," says Redfern. "One is that we have come closer together in our philosophies ? . Second, quite frankly, many mergers don't happen because the CEOs don't see them being in their own personal interests."

In February, both Taylor Woodrow and George Wimpey were led by CEOs so new the ink had barely dried on their business cards. Redfern, 36, had been with George Wimpey since 2001, but he had only risen to the CEO level last July. Ian Smith, 52, Taylor Woodrow's chief, had arrived in January. Before, he was chief executive of General Healthcare Group.

"We both were prepared to put ourselves on the line and say this is the right thing to do for shareholders," remembers Redfern. He gives Ian Smith, who will be leaving the merged companies, particular credit for "having the maturity to be honest and the professionalism to look at it this way and believe it's the right thing to do. ? It's as good as you will ever see ? the fit of the two companies."

Once the deal was struck, circumstances called for a quick union. The merged company has immediate plans to expand the family across the pond in the United States. The companies' pooled capital is at the ready to take advantage of buying opportunities that might present themselves in a drastically cooled home building market here. Plus, together, the executives expect to better weather the U.S. slowdown. After all, there are economies of scale that accrue to those with market share clout, they say.

By March the nuptials (a "scheme of arrangement" in British merger talk) were set to be final by early July. The partnership would be one of near equals, with Taylor Woodrow stockholders getting 51 percent of the new issued stock and George Wimpey's getting 49 percent. Even the new merged management roster suggests equality among the partners, the list alternating between former Wimpey and former Taylor Woodrow executives.

About two months after the announcement, each set of shareholders voted "yea" that they had no objections, and the deal was virtually done, lacking only a routine stamp of approval from the British courts. Paperwork delisting the two companies' existing stock and issuing new stock in the name of the merged company, Taylor Wimpey, would follow.